Monsoon covers entire India, barring some parts of Gujarat, Rajasthan

Despite a deficit in June, rains are expected to improve in July, which is more beneficial for farmers

The monsoon rains had covered almost entire India except some part of Gujarat and Rajasthan until Sunday and is expected to cover the remaining parts in 48 hours, the Indian Meteorological Department (IMD) said on Sunday.

With this, rain deficit has narrowed. The IMD on June 30 had observed 1% of rainfall deficit. The rainfall spread across the country, however, was uneven with a major crop area in Rajasthan and Gujarat continuing to receive lower--normal rainfall till June 30.

“The southwest monsoon has further advanced into some more parts of Gujarat, most parts of east Rajasthan, remaining parts of Punjab and Haryana, Chandigarh and Delhi and some parts of Rajasthan. Conditions are favourable for further advance of southwest monsoon into remaining parts of north Arabian sea, Gujarat and Rajasthan during the next 48 hours,” said the IMD in its report on Monday.

Rainfall during the monsoon season assumes greater significance since around 70% of sowing takes place during this season.

Paddy, soybean along with some other oilseeds are major kharif crops sown during the onset of monsoon, for harvesting in September-October season.

The significance of the monsoon rainfall and its even distribution can be gauged from the fact that most agri and economy related policy decisions are estimated based on the monsoon rainfall and changed according to its actual receipt.

Meanwhile, Sonal Verma, an analyst with Nomura, said: “India’s monsoon season (June-September) has begun on a weak note. So far in June (1-26) rains are currently tracking 16% below the long period average (LPA). Spatial distribution of rains has been uneven, crop sowing is delayed and reservoir levels are worryingly low. Production of pulses, oilseeds, coarse cereals and cotton could be at risk, if rains don’t improve.”

She added even as June rains have disappointed, we are not worried, as July rains matter more (for crop output) and they are forecast to improve. Assuming rains recover in July, we expect kharif (summer crop) production growth to rise to 3.2% y-o-y in 2016 (versus -3.2% in 2015). This, coupled with a weak base, should push up agriculture growth to 3.6% in FY17 from 1.2% in FY16, adding 30 basis points (bps) to headline gross domestic product (GDP) growth.

Region-wise, Central India (30% below normal) and North East India (-24%) have witnessed the highest rain deficiency. Bigger states reporting deficient or scanty rainfall, such as Gujarat, Madhya Pradesh, Maharashtra and Rajasthan, have a higher share in the production of pulses, oilseeds, coarse cereals and cotton, which could be at risk, if rains don’t improve.

With monsoon rains slow to start, sowing has taken a hit. Total sown area stood at 11.7% of normal sowing area as on June 24, lower than 15.4% in 2015. Reservoir levels (at 15% of the live storage capacity) are at worryingly low levels.

Food price inflation rose sharply in May, but it has moderated in June. Going forward, although good rains are a positive for production, they do not guarantee low food price inflation. Despite that, food price inflation is expected to ease from current levels owing to relatively stable rural wage growth and favourable base effect in Q4 2016, Normura said in a report.

India received deficit monsoon rainfall during the last two seasons, resulting in lower kharif and rabi crops output which ultimately resulted in rising food inflation in the last few months.